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Garmin worries about shareholders

by diane 2010-03-02 02:16

The fourth quarter results announced by Garmin were better than we expected.
Revenue growth was flat for the quarter and down 16% for the year. Management expects flat revenue growth in 2010, an uninspiring outlook given the low benchmark set during 2009. The most surprising result was gross margin expansion as pricing for input components fell faster than device prices. However, we do not expect this temporary reversal in margin erosion to be sustainable as the firm is already projecting gross margin to compress by 200-300 basis points during 2010. The firm announced a $300 million share repurchase program for the next two years. We support any of Garmin's efforts to return cash to shareholders -- preventing the cash from being thrown away on projects such as the nüvifone.

We are also lowering our uncertainty level for Garmin to high. We are becoming increasingly certain that there is room for Garmin to escape the headwinds facing the automotive segment.

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